The attack, claimed by Hamas, killed nine Israelis and wounded more than 40, several critically. Many of the passengers were soldiers traveling to their bases.

In another incident on Sunday, a Palestinian gunman killed an Israeli security guard in a shooting attack outside Jerusalem’s Old City.

The measures to help the Palestinian population include permitting up to 12,000 Palestinians to work in Israel, lowering the age of Palestinians allowed to enter Israel, increasing the number of Palestinian merchants allowed to trade in Israel and easing travel restrictions on Palestinian medical and aide teams operating in Palestinian- controlled areas.

Meanwhile, reports said that in the wake of the bus attack, Sharon was likely to put off talks planned this week with Palestinian officials.

But Ben-Eliezer said Sunday that his planned meeting with the new Palestinian interior minister, Abdel Razak Yehiyeh, likely would take place.

The two are expected to discuss a plan aimed at restoring calm by focusing on one defined area of the territories and trying to extinguish violence there, before moving on to another area, according to the Israeli daily Ha’aretz.

Three soldiers were also named: Sgt. Maj. Roni Ranen, from the Druse village of Marar; Sgt. Omri Gol-Din, 20, from Mitzpe Aviv; and Sgt. Yifat Gavrieli, 19, of Mitzpe Adi.

The force of the blast blew out the bus windows and ripped off the top of the bus.

The driver of the bus, who also survived a suicide bus bombing in Jerusalem six years ago, was lightly hurt.

“The entire rear end of the bus was blown off,” said one witness, Pinchas Cohen. “A soldier came out with his face and uniform covered with blood, and two Arabs from the nearby restaurant gave him first aid.”

Hamas said the bombing was a suicide attack, calling it the latest act of retaliation for Israel’s July 23 assassination of the leader of Hamas terrorists in the Gaza Strip.

The shooting attack outside Jerusalem’s Old City occurred shortly before noon, when a gunman opened fire on a truck belonging to Israel’s main telephone company, Bezek. The security guard was killed and the driver was injured, police said.

A group of Israeli border police officers stationed at the Damascus Gate returned fire, killing the 19-year-old Palestinian gunman.

A Palestinian bystander also was killed in the shootout.

Later on Sunday, three Israelis were wounded in a Palestinian ambush on their bus in the northern West Bank. Following the attack, there were exchanges of fire between Israeli troops who arrived at the scene and Palestinian gunmen.

In another attack on Sunday, three Israelis were wounded by a roadside bombing near Ramallah.

In yet another Sunday incident, Israeli soldiers killed an armed Palestinian who tried to infiltrate a Gaza settlement from the sea.

Security forces spotted the Palestinian, who was wearing a diving suit and walking along the shore near the settlement of Dugit, in northern Gaza.

He was armed with a rifle, ammunition and several grenades, Army Radio reported.

President Bush condemned Sunday’s terrorism, calling on the international community to “stop those murderers.”

Bush, speaking before a round of golf, called on nations around the world to work to halt Arab terror attacks, which he said were harming Israelis and Palestinians alike.

“There are a few killers who want to stop the peace process that we have started. We must not let them,” Bush said.

“For the sake of humanity, for the sake of the Palestinians who suffer, for the sake of the Israelis who are under attack, we must stop the terror.”

Israel blamed the Palestinian Authority for the bus bombing.

An official in the Prime Minister’s Office, David Baker, called the attack an example of “how the Palestinian Authority feeds on terror.”

The Palestinian Authority issued a statement condemning the attack, but said Israel was responsible for the violence.

In a new policy aimed at deterring Palestinian terror attacks, Israeli soldiers on Sunday demolished the homes of nine Palestinian terrorists. The soldiers blew up four homes in the Jenin area, three in Nablus and two in Hebron.

Meanwhile, soldiers kept up a siege on Nablus that began last Friday, searching shops and houses for terrorists. Israel says Nablus has replaced Jenin as the main hub of terrorist cells responsible for attacks on Israelis.

The policy of demolishing the homes of terrorists’ families has deterred several would-be suicide bombers, Israeli intelligence officials say.

Jallal Halil Jarar, 17, who was arrested last month, was in line to be a suicide bomber for Islamic Jihad but told Israeli investigators he backed out because of concern for what Israel would do to his family.

A woman, Umiya Muhammad Damaj, 24, had offered to be a suicide bomber for Islamic Jihad but turned herself in out of fear that, after her attack, Israel would demolish her parents’ home.

Near Hebron, a father informed on his son’s plans to go on a suicide mission, fearing that the family would be expelled from their home.